NEW YORK Defense industry
suppliers will have to cope with a drop in orders over the next
few years due to defense budget cuts, analysts say.
"Research and development will
come down first; procurement will come down shortly after,"
Boeing Co. supply chain director Dana W. Hullinger told
participants at AMMs 6th Annual Aerospace
Materials Conference in Pittsburgh. He noted that defense
budget cuts of between $600 billion and $800 billion are
projected over the next 10 years.
The cuts will lead to some
defense projects being slowed or spread out over longer
periods, Hullinger said.
The outlook was echoed by Robert
J. Olsen, aviation lead for the industrial base group at the
Aviation and Missile Research, Development and Engineering
Center, which falls under the U.S. Army Research, Development
and Engineering Command. "What were seeing is a lot of
early stage programs and not a lot in the engineering and
manufacturing phase," he said, adding that the military was
more inclined to upgrade older programs than to approve new
This had led to some supplier
erosion and an increasing reliance on offshore manufacturers, a
development Olson said was worrying. "Industrial capability is
the key to national defense," he said.
Defense sector spending has
declined by about 25 percent since 2008, according to Myles
Walton, director for equity research on aerospace and defense
at Deutsche Bank. "It doesnt feel like 25 percent yet
because backlogs stretch out years."
One defense industry supplier
told AMM on the sidelines of the conference that he
had seen a significant slowdown over the past year. "Business
has been terrible," he said.
While the defense sector is
slowing downwith Hullinger saying he had already seen
some suppliers go bankrupt this yearthe boom in
commercial aircraft build rates raised concerns that suppliers
would look to switch. "Will people get drawn to other parts of
the business?" he asked.